The Secure Act: How it May Impact Your Retirement Plans

What is the SECURE Act?

In December 2019, Congress passed a new retirement savings bill known as the SECURE Act (Setting Every Community Up for Retirement Enhancement).

With the new legislation now in place, this may impact estate planning as it relates to IRA beneficiaries while having the potential to influence charitable giving through IRAs.

Who will it effect?
The revised age for when individuals must begin taking required minimum distributions (RMD) has changed to 72 from 70½.

The new law only applies to people who turn 70½ after December 31, 2019. If a person turned 70½ in 2019, that person must still take a RMD in 2019, 2020 and beyond.

What did not change?
Individuals who are age 70½ or older are still eligible to make a qualified charitable distribution if they choose to do so. This piece did not change with the new bill.

You’re still allowed to give up to $100,000 per year from your IRA directly to a charity without having to include that money in your income. In addition, this donation can be used to cover your RMD.

Time to Revisit your estate plans?
The idea of “Stretch IRAs” will no longer exist. Previously, they allowed non-spousal inheritors of IRAs to take distributions over the course of their anticipated life expectancy and spread out their tax liability.

Now, the inheritor is required to take full distributions within 10 years, which will more than likely mean a higher tax bill for them.

For some donors, it could make more sense to donate their IRAs to charities and give their heirs other assets with fewer tax liabilities

We encourage you to seek advice from your attorney or financial advisor regarding all the ways this bill may impact your future plans.